The key announcements are;
State Pension age rise to 67 will take place as planned between 2026-2028.
Review within two years of next Parliament to reconsider rise to age 68.
The Government claims that this delivers on its responsibility to ensure the State Pension remains sustainable and fair across the generations.
There is no devil and not much detail
The Government has confirmed the State Pension age will rise to 67 by the end of 2028, following a review published today.
After carefully considering expert evidence, including two independent reports, the Secretary of State for Work and Pensions has concluded the planned pension age rise from 66 to 67 for those born after April 1960 remains appropriate.
The Pensions Act 2014 requires the Secretary of State for Work and Pensions to regularly review State Pension age. To inform this Review, two independent reports were commissioned – analysis from the Government Actuary based on life expectancy projections and the proportion of adult life spent in retirement, and findings from Baroness Neville-Rolfe which considered relevant factors including life-expectancy trends.
As the number of people over State Pension age increases, the Government must ensure it remains sustainable and fair for current and future generations.
The Government plans to have a further review within two years of the next Parliament to reconsider the rise to age 68. This of course is a commitment on a future Government that cannot be enforced should there be a change of Government.
The Government claims this gives appropriate time to take into account evidence which is not yet available on the long-term impact of recent challenges, including the Covid pandemic and global inflationary pressures. It also claims these events bring a level of uncertainty in relation to the current data on life expectancy, labour markets and the public finances. These claims are open to challenge.
The Government claims that by delaying the decision it will ensure it is able to consider the latest information to inform any future decision on the State Pension age. This will include life expectancy and population projections updated with 2021 Census data and the latest demographic trends, the economic position and the impact on the labour market of the recently announced package of measures to tackle inactivity. However none of this information will provide a crystal ball and it could be argued that new data emerges every year.
The Government argues that given the wide-ranging impacts of changing the State Pension age, it is important to take the time to get any changes right. The Government committed to five yearly reviews of the state pension age and it is hard to see why this decision is being deferred other than to avoid the unpleasant consequences of accelerating the increase in the state pension age to 68.
Secretary of State for Work and Pensions Mel Stride said:
It’s essential the State Pension remains sustainable and fair across the generations. Our balanced approach will help achieve this and ensure we continue to provide security and dignity in retirement for millions of people across the country.
But the Government’s announcement goes on to explain that the timetable for change will be limited to the principle of fore-noitce.
The Government says it remains committed to the principle of providing 10 years notice of changes to State Pension age, enabling people to plan effectively for retirement. All options for the rise to the State Pension age from 67 to 68 that meet the 10 years notice period will be in scope at the next review. That means the increase to 68 could still be penciled in for 2027, even if there isn’t another parliament till early 2025.
Lucy Neville Rolfe has been working on this since 2021. Her report concludes that the State Pension age increase to age 67 in 2026-2028 was consistent with the a target of paying the pension for 31% of the adult life , but this was not the case with the age 68 increase timetable as set out in the 2017 Review and, as a result, she recommended that the timetable should be pushed back to 2041-43
The Government has chosen to ignore the recommendation to pitch the 68 SPA half way between the dates suggested by John Cridland in 2017 and the current timetable. The argument Neville-Rolfe uses for this is primarily that lower fertility rates justify it.
The Government is making no mention of the issues surrounding lower fertility rates which mean there are less people at work to pay the pensions of those in later life,
Indeed the only conclusive thing that we learn about their thinking is from DWP boss Mel Stride who sums up the decision with the pithy
Now is not the time.
They decided they didn’t want any riots